HP Takes Another PR Hit

Meg Whitman’s Hewlett-Packard tried to put the debacle of its Autonomy acquisition behind it last week by taking an $8.8 billion write-off, charging that previous management had been misled by cooked
books and other nefarious deeds on the part of the UK-based software automation company. The claims have turned into yet another public relations spectacle
for the Palo Alto-based company as Autonomy founder and former CEO Mike Lynch fights back with fire and feist, and pundits again point fingers at HP’s management, board and outside advisers for
ineptitude.

Meanwhile, a class action suit filed in San Francisco yesterday “alleged that HP had issued false and misleading statements on its financial performance and
prospects between August 2011, when the $11 billion Autonomy deal was announced, and November 20 this year,” when the write down was made public, as Chris Nuttall reports in the Financial Times.

The civil action was not unexpected, and more lawsuits may follow. “It’s hard to imagine that this deal goes so far south so quickly without somebody having culpability,”
Labaton Sucharow partner Dominic Auld tells Nuttall while disclosing that his firm is considering action of its own.

Whitman, now HP president and CEO but only a yea-voting member of the HP board at the time of the acquisition, effectively blames her predecessor, Leo Apotheker, and the former chief strategy officer, Shane Robison, for the bad deal.

"To put it bluntly ... this story has been an unmitigated train wreck, and it seems every time management speaks to the Street, there is new negative incremental information
forthcoming," ISI Group analyst Brian Marshall told Reuters’ Poornima Gupta and Nicola Leske when the write-off was announced.

The Wall Street Journal’s “Heard on the Street”
columnist, Rolfe Winkler, offers a scathing appraisal of the situation this morning, pointing out in his lede that “more than two people from Hewlett-Packard were responsible for the disastrous
Autonomy acquisition, never mind what chief executive Meg Whitman says.” He names names, from current CFO Cathie
Lesjak to current board chairman Raymond J. Lane. But although investors might like to see “more heads
roll,” that may not be a prudent response.

“The sad reality,” Winkler concludes, “may be that the company is in such bad shape that it can't afford more
turnover at the top. Until it can, investors should stay away from the shares, no matter how cheap they appear.”

And as Reuters’ Nadia Damouni and Nicola Leske pointed out last week, “15 different financial, legal and accounting firms were involved in the
transaction -- and none raised a flag about what HP said Tuesday was a major accounting fraud.”

Meanwhile, Lynch, who in 1991 played a hunch that the “theories of the
then-little-known 18th-century Presbyterian minister and mathematician Thomas Bayes could be used to search and understand unstructured data,” as Wendy M. Grossman relates in The Guardian, has been vigorously pushing back against HP’s charges.

“Lynch has been unusually candid and vocal in defending himself and the company he built, rather than hiding out behind a phalanx of lawyers as might be expected,” the New
York Times’ Quentin Hardy writes. “He says he was
blindsided by a long-prepared public relations onslaught by HP, little of which had to do with the substance of its claims about Autonomy.”

Lynch is not limiting himself to
denying the accusations. Among his charges In an interview with Business Insider’s Julie Bort:
HP executives engineered the ouster of Apotheker and appointment of Whitman because they “feared Apotheker's plan to spin off the hardware business in favor of software,” which caused
Whitman “to abandon the software strategy, which left Autonomy and Lynch in the lurch.” And to top it off, “HP's convoluted bureaucracy created situations where its own salespeople
couldn't sell Autonomy.”

If all these convolutions have you scratching your head, Reuters’ “Breakingviews” columnist, Quentin Webb, delves into such
accounting procedures as “Vendor Specific Objective Evidence” (VSOE), which allows companies “to book upfront payments in full if they establish a predictable pricing
framework,” in a “Guide for the Perplexed” piece.

“As things stand, HP’s accusations are hard to judge,” Webb writes, pointing out that it still “has to prove its claim that it was duped by fraud which could not be
detected before acquisition.”

“As HP’s reputation as the company that cannot shoot straight has grown to almost legendary proportions, its stock price has collapsed,” Richard Waters and
Chris Nuttall wrote in the Financial Times Friday evening. It was up 2.4% yesterday to $12.74, but
was trading in the $50 range as recently as April 2010.

You would think that people would begin to grasp that these "consultant firms" don't always (or generally?) act on behalf of the company's best interest. Enron. 2008 Financial Crash. HP. How many more points of proof do executive's need to gain a savvy skepticism - that the bigger the consultant firm the less likely they'll deliver value? Not always true...but a good rule of thumb.

Thom Forbes has written about marketing and media for more than 25 years. He was editorial director of Adweek and its sister publications in the 1980s and has covered the beat as a freelancer since 1990. For more than three years, he wrote Around the Net in Brand Marketing for MediaPost.